Question

Kim is a senior auditor at Wing CPA firm. She is in charge of formulating the audit plan for several key controls and accounts. Her manager has determined that if the account is misstated by $20,000 the misstatement is material. The account includes some unusual and significant transactions that have occurred over the year. When planning control tests for the account, Kim wants to utilize sampling for her testing.

Required:1. How can Kim stratify the transactions in the account to best utilize sampling?2. What is sampling risk? How might affect the audit conclusions Kim makes based upon the control tests?3. If Kim misses anything as a result of sampling, what audit procedures might uncover the error during the ICFR audit? During the financial statement audit?